Actuarial Value

Actuarial Value: What Health Plan Cost-Sharing Really Means

Actuarial Value is the percentage of covered medical costs a health plan is expected to pay for a typical group of people, while members pay the rest through deductibles, copayments, and coinsurance.

That definition sounds more personal than it is. A plan with a 70% actuarial value doesn’t promise to pay 70% of your bills. It’s an average calculated across a standard population, so your own split could look very different depending on how much care you use.

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Learn what Actuarial Value means, how health plans calculate it, how it relates to metal tiers, and what employers and employees should compare when choosing coverage.

What is Actuarial Value?

Actuarial Value measures how a plan divides the cost of covered care between the insurer and its members. The federal rules for calculating it appear in 45 Code of Federal Regulations Sections 156.135 and 156.140, with the Centers for Medicare & Medicaid Services publishing an Actuarial Value Calculator and methodology for each plan year.

Under the Affordable Care Act, individual and small-group plans generally fall into metal categories based on their expected share of covered costs:

• Bronze: about 60%
• Silver: about 70%
• Gold: about 80%
• Platinum: about 90%

Federal rules permit limited variation around those target percentages, so two Silver plans won’t necessarily produce identical results. The percentage also isn’t a quality score. A Bronze plan isn’t worse medical care than a Gold plan; it generally puts more cost-sharing on the member in exchange for what may be a lower monthly premium.

The calculation focuses on covered essential health benefits and member cost-sharing. It doesn’t include your premium, services the policy excludes, or every possible out-of-network charge. The Centers for Medicare & Medicaid Services’ 2026 Actuarial Value Calculator Methodology explains the standard population data and plan design inputs used for this calculation.

How does actuarial value work in practice?

Suppose a Silver plan has a 70% target. Across the standard population, the plan is designed to pay roughly $7,000 of every $10,000 in covered expenses, with members collectively paying about $3,000. That doesn’t mean an employee with $10,000 of claims will personally owe exactly $3,000; the deductible, copayments, coinsurance, provider network, and out-of-pocket maximum control the actual result.

Here’s how that can sit alongside an employer-funded benefit. Cedar Lane Studio has 10 employees and offers each person a $500 monthly allowance through an Individual Coverage Health Reimbursement Arrangement (ICHRA). Maya chooses a Silver individual plan costing $620 per month:

• Employer reimbursement: $500 per month
• Maya’s remaining premium: $620 − $500 = $120 per month
• Annual employer allowance available to Maya: $500 × 12 = $6,000

The $500 allowance helps pay the premium; it doesn’t change the plan’s actuarial value. If Cedar Lane used SimplyHRA’s Premium service at the stated $29 per employee per month, its platform cost would be 10 × $29, or $290 monthly, separate from reimbursement funding.

Who does it apply to?

For employees buying coverage through the individual market, including a federal or state Marketplace, actuarial value makes broad cost-sharing levels easier to compare. It’s especially useful when you’re weighing a lower premium against the risk of a larger deductible or higher costs when you receive care. Cost-sharing reductions can increase the value of a Silver Marketplace plan for eligible households, as described in the federal Marketplace rules at 45 Code of Federal Regulations Section 156.420.

For small employers offering a traditional fully insured small-group plan, metal levels help frame how much cost-sharing employees may face. If you fund individual coverage through an ICHRA or a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), each employee may choose a different metal level, subject to the arrangement’s rules.

Large-group, self-funded, grandfathered, Medicaid, and catastrophic coverage don’t all use metal tiers in the same way. Employers may also encounter the separate Affordable Care Act “minimum value” test for job-based coverage. It uses a 60% standard, but it serves a different legal purpose and shouldn’t be treated as interchangeable with a plan’s consumer-facing metal category.

What employers actually pay for

Actuarial value itself isn’t a fee, tax, or amount you contribute. For a fully insured individual or small-group policy, the insurer generally performs the federal calculation and assigns the metal level. Your costs are the premiums or reimbursements you fund, administrative expenses, and any employee contributions—not the percentage printed beside “Bronze” or “Gold.”

A richer plan often has a higher premium because it shifts more covered costs to the insurer, but that relationship isn’t guaranteed. Provider networks, local prices, prescription formularies, age, location, and family enrollment can also move the premium.

If you sponsor coverage, review the Summary of Benefits and Coverage before enrollment and give it to eligible employees at the required times. The Department of Labor’s Summary of Benefits and Coverage regulations and templates govern that disclosure. Don’t calculate or advertise your own metal level unless the carrier or qualified plan professional has confirmed it under the Centers for Medicare & Medicaid Services 2026 Actuarial Value Calculator Methodology.

Compliance deadlines and possible penalties

There’s no standalone federal filing deadline or penalty merely because a plan has a particular actuarial value. The bigger compliance issue is often “minimum value,” a separate Affordable Care Act employer-mandate test.

If you’re an Applicable Large Employer—generally averaging at least 50 full-time employees, including full-time equivalents, during the prior calendar year—you must consider Internal Revenue Code Section 4980H. Coverage ordinarily must pay at least 60% of allowed costs and provide substantial inpatient hospital and physician services to satisfy minimum value.

For 2026, the indexed Employer Shared Responsibility Payment amounts are generally $3,340 annually under Section 4980H(a) and $5,010 annually under Section 4980H(b), calculated monthly. The first can apply when you fail to offer minimum essential coverage to at least 95% of full-time employees and at least one receives a Marketplace premium tax credit. The second can apply per full-time employee receiving that credit because your offer was unaffordable or didn’t provide minimum value, subject to a cap. The IRS Employer Shared Responsibility Provisions Questions and Answers explains both calculations.

Applicable Large Employers also file Forms 1094-C and 1095-C according to the annual IRS instructions. Calendar deadlines and electronic-filing requirements matter even though they don’t determine actuarial value.

What employees should expect

Your plan’s percentage doesn’t come directly out of your paycheck. Your paycheck reflects your premium contribution; your deductible, copayments, and coinsurance appear when you receive covered care.

If you currently have no insurance and your employer offers an Individual Coverage Health Reimbursement Arrangement (ICHRA), you generally need to enroll in qualifying individual health insurance before reimbursements can be made. A new ICHRA offer can create a Special Enrollment Period, so you may not need to wait for annual Marketplace open enrollment. The federal ICHRA regulations require advance notice—generally 90 days before the plan year for existing eligible employees, with different timing when eligibility begins later.

Compare more than the metal label. Check whether your doctors are in network, your prescriptions are covered, and you could handle the deductible and out-of-pocket limit. If you qualify for cost-sharing reductions, you must select a Silver Marketplace plan to receive them.

Worked employer-penalty example

Northstar Fabrication has 52 full-time employees in 2026. It doesn’t offer coverage to at least 95% of them, and one full-time employee buys Marketplace coverage and qualifies for a premium tax credit.

The potential Section 4980H(a) payment is:

• 52 full-time employees − 30 = 22
• 22 × $3,340 = $73,480 for the full year

That result isn’t triggered by choosing Bronze instead of Gold. It’s triggered by the offer-of-coverage rules and the employee’s premium tax credit.

Common actuarial value mistakes

• Treating 70% as a personal guarantee. Your claims won’t automatically be split 70/30.
• Assuming a higher metal level always saves money. You may pay more in premiums than you save in cost-sharing, especially if you use little care.
• Confusing actuarial value with minimum value, affordability, network quality, or covered benefits. Each answers a different question and can carry different employer obligations.

Frequently Asked Questions About Actuarial Value

Does actuarial value include monthly premiums?

No. The calculation looks at how covered medical spending is divided after someone is enrolled, not what they pay to keep the policy active. That’s why a plan with a higher actuarial value can still be a poor fit if its monthly premium strains your budget. Employers comparing plan designs should evaluate the premium, employee contribution, network, and expected cost-sharing separately rather than treating one percentage as an all-in cost measure.

Can two health plans with the same deductible have different actuarial values?

Yes. A deductible is only one part of the design. Two plans with a $3,000 deductible may use different copayments, coinsurance rates, prescription tiers, service-specific deductibles, and out-of-pocket limits. Those differences can produce different actuarial values even when the headline deductible matches. The Centers for Medicare & Medicaid Services’ annual Actuarial Value Calculator methodology accounts for multiple cost-sharing features, so employers and employees shouldn’t compare plans on the deductible alone.

Does actuarial value affect my premium tax credit?

Not directly. Your advance premium tax credit is generally based on household information and the cost of the second-lowest-cost Silver plan available to you, not the actuarial value of the plan you ultimately select. You can usually apply the credit to an eligible Bronze, Silver, Gold, or Platinum Marketplace plan, although the remaining premium changes with your choice. Eligibility can also be affected by an affordable employer offer, Medicaid eligibility, or other qualifying coverage under Internal Revenue Code Section 36B and the federal Marketplace eligibility regulations.

Do health savings account contributions change a plan’s actuarial value?

They can in limited circumstances. Under the federal actuarial value methodology, certain employer contributions to a Health Savings Account (HSA) or amounts made available through an integrated Health Reimbursement Arrangement (HRA) may be reflected when the plan’s value is calculated. Your own HSA deposits don’t simply raise the plan’s metal level. Employers should follow the Centers for Medicare & Medicaid Services calculator instructions rather than adding account contributions to the insurer’s payment percentage themselves.

Do short-term health plans have an actuarial value or metal level?

They generally aren’t assigned Affordable Care Act metal levels. Short-term, limited-duration insurance is designed as temporary coverage and is subject to a different federal framework under 45 Code of Federal Regulations Section 144.103. It may exclude conditions or benefits that an individual-market major medical plan would cover. If you’re uninsured and considering one, don’t assume a low premium means Bronze coverage; read the exclusions, coverage period, renewal terms, and dollar limits before enrolling.

Is actuarial value calculated separately for every employee?

No. It’s determined using a standard population and the plan’s benefit design, not your age, diagnosis, salary, or expected claims. The same plan therefore keeps the same calculated value for a light user and someone managing a chronic condition, even though their personal spending can differ sharply. For an employer, this allows standardized plan classification. For an employee, it means your likely prescriptions, appointments, and procedures still matter more than the population-wide percentage when estimating your own annual costs.

Can state rules change a plan’s actuarial value?

States can require individual and fully insured small-group plans to cover benefits beyond the federal baseline, and each state has a benchmark plan that helps define its essential health benefits. Those choices can affect what services enter the calculation, premiums, and plan design, but Marketplace metal categories still operate under federal actuarial-value standards. State regulators may also impose tighter requirements or review plan filings before sale. If employees live in different states, compare the plan approved where each employee resides rather than assuming one state’s Silver plan is identical to another’s. See 45 Code of Federal Regulations Sections 156.100 and 156.140.

Can I switch metal levels after a qualifying life event?

A qualifying life event may open a Special Enrollment Period, but it doesn’t always give you unrestricted access to every metal level. Marketplace plan-category limitations can depend on the event, whether you’re already enrolled, and which household member experienced the change. Marriage, birth, adoption, loss of qualifying coverage, and a permanent move can produce different effective-date and plan-selection rules. Report the event promptly and provide any requested proof; missing the enrollment window can leave you without a change until the next Open Enrollment Period. The governing rules appear in 45 Code of Federal Regulations Section 155.420.

Do owners, part-time employees, and new hires get the same actuarial value?

If they enroll in the same employer plan, its actuarial value doesn’t change based on ownership, hours, or hire date. Whether they may enroll is a separate question controlled by the plan’s eligibility terms and applicable benefits and tax rules. A plan might exclude part-time workers, impose a permitted waiting period on new hires, or treat an owner differently based on whether the business is a C corporation, S corporation, partnership, or sole proprietorship. The Public Health Service Act’s waiting-period rules generally prohibit an otherwise eligible employee from waiting more than 90 days.

Does COBRA continuation coverage keep the same actuarial value?

Usually, yes. The Consolidated Omnibus Budget Reconciliation Act (COBRA) generally lets a qualified beneficiary continue the same group health coverage available to similarly situated active employees, so the underlying plan design doesn’t become a lower-value version just because employment ended. The price can change dramatically, though: the plan may generally charge up to 102% of the total cost because the former employee can lose the employer subsidy. If the employer later changes the active plan’s deductible or cost-sharing, the COBRA coverage generally changes alongside it. Department of Labor COBRA regulations govern these continuation rights.

Do Medicare and Medicaid plans have actuarial values or metal levels?

Original Medicare and Medicaid aren’t sorted into Bronze, Silver, Gold, or Platinum categories. Medicare Advantage and Medicaid managed-care plans use their own federal and state benefit, cost-sharing, and adequacy standards rather than Marketplace metal labels. If you become eligible for Medicare or Medicaid, don’t compare that coverage with an individual plan using actuarial value alone. Enrollment may affect Marketplace premium tax credits, employer reimbursement eligibility, and whether keeping other coverage makes financial sense. Coordination rules also determine which payer is primary when you have Medicare alongside an employer plan.

Use Actuarial Value to Make a Better Benefits Decision

Remember that actuarial value estimates how covered costs are shared across a standard population, not what you personally will pay. It doesn’t include premiums, and it can’t tell you whether a plan’s doctors, prescriptions, deductible, or total yearly cost fit your needs. Employers should also keep it separate from Affordable Care Act minimum-value and affordability tests.

SimplyHRA fits small businesses and HR managers that want predictable benefits costs without enterprise overhead: you set a tax-free monthly allowance through an Individual Coverage Health Reimbursement Arrangement (ICHRA) or Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), and employees choose individual coverage that fits their lives. We built SimplyHRA after living small-business benefits problems ourselves, and we’ve helped other owners and their teams set up and run these benefits without the enterprise overhead.

This article is education, not legal or tax advice. For a consultation about employer or employee benefits, email info@simplyhra.com or schedule a call.